Maybe it’s time to say uncle.
It’s one of the oldest cliché’s used by coaches in nearly every sport; “Winners never quit and quitters never win.” However, there are times when even the most optimistic coach knows when to throw in the towel realizing that no matter what they say or do, their team just does not have a realistic chance of winning.
This is the situation Roche finds themselves in with their insulin pump unit. After spending over $1 billion to buy Disetronic back in 2003, the unit has experienced nothing but problems. Some may recall that shortly after the acquisition the FDA halted sales of Disetronic insulin pumps. It wasn’t until October of 2006 that the company was once again able to sell pumps in the US. Already facing stiff competition before the FDA problems the unit lost valuable ground and really has never recovered.
Instead of coming up with a completely new system during their hiatus from the market, the company chose instead to launch a conventional pump when the FDA lifted their sales ban. While there was nothing really wrong with the Accu-Chek Spirit pump, there was nothing about it that made it stand above the competition who had also introduced newer more advanced systems.
Things became so bad at the unit that they couldn’t meet payroll and gutted the unit. Many, including Diabetic Investor, speculated that instead of trying to reestablish themselves in the market the company wouldn’t throw good money after bad and would quietly exit the insulin pump market. Apparently this is not the case as the company has decided to throw even more money into this sinkhole.
With a new pump set to hit the market in September, the company is actively seeking new sales people. Not wanting to learn from past mistakes this new pump really offers nothing new and is merely a me-too product. Instead of coming up with something that is truly innovative the plan appears to be based on one of the oldest strategies around, when your product isn’t any better than the competitions sell what you have for less.
It’s about time someone explained the facts of life to the people at Roche, seeing as the current management team is either unwilling or unable to acknowledge what’s going in the insulin pump market. First and foremost, the competition isn’t sitting around doing nothing they too are upgrading their existing systems. Animas, a unit of Johnson and Johnson (NYSE:JNJ), is not only coming up with new systems but adding more sales people to make a serious run at insulin pump market leader Medtronic (NYSE:MDT), who also has two new pumps coming to market. Insulet (NASDAQ:PODD) has the OmniPod which continues to gain market share and will soon be upgraded with a smaller pod and new PDM.
But even before Roche try’s to re-enter the market they have a much more serious problem to deal with. In the insulin pump world the Roche name has a lower approval rating than former President Bush had when he left office.
In reality the insulin pump isn’t all that different from the blood glucose monitoring market where there are too many systems that do exactly the same thing. Even when you have an innovative system such as the OmniPod, competitors will quickly develop similar systems just as Medtronic is doing developing their own wireless system.
The fact is success in the insulin pump market comes down to three things, money, manpower and most importantly trust. While Roche has money and can hire the manpower their checkered history in the insulin pump market has cost them the most valuable commodity there is; trust. Physicians and patients simply don’t believe Roche is committed to the insulin pump market and with credible alternatives available there is not one compelling reason for them to choose a Roche pump. Even if Roche offers this new system at a cheaper price, competitors will quickly match any price reduction.
Sadly, Roche has lost their way in the diabetes device world. The acquisition of Disetronic has proved to be a costly disaster and the Accu-Chek line of blood glucose monitors continues to lose share. On top of all this the company cannot simply change management as Bayer did when their BGM unit was struggling as market conditions have changed drastically. Once a dominate player the company has fallen from grace with mistake after mistake. Even worse management fails to acknowledge the extent of the damage or just how much the market has changed.
While it’s possible for both the insulin pump and BGM unit to return to respectability, Diabetic Investor isn’t optimistic. That would require a drastic change at Roche and given their recent history that doesn’t appear likely. The company appears to be living in the past operating under the delusion that the markets they operate in will somehow magically turnaround and go back to the way things were years ago. Or as Benjamin Franklin once wrote; “Who has deceived thee so oft as thy self?”